Earn-Out Accounting Dispute Expert Witness UK

An earn-out is a mechanism where part of the purchase price depends on the future financial performance of the acquired business, typically measured over one to three years post-completion.

Common disputes include whether the earn-out was not achieved due to genuine underperformance or buyer conduct, whether the earn-out was calculated incorrectly, whether the buyer changed the business model in a way that made achieving the earn-out impossible, and whether revenue or costs were manipulated during the earn-out period.

The expert constructs a but-for model showing what the earn-out metrics would have been absent the alleged misconduct or accounting error, and compares it to the actual outcome.

SPA earn-out provisions typically require the buyer to maintain consistent accounting policies during the earn-out period. Where the buyer changes policies to reduce reported earn-out metrics, the expert must restate the metrics on a consistent basis.